Cato Fashions’ FY17 net income plunges 82 percent to 8.5 mn dollars

The Cato Corporation has reported a net loss of 15.5 million dollars or a loss of 0.62 dollars per diluted share, compared to 12.8 million dollars or 0.48 dollar per diluted share for the prior fourth quarter ended January 28, 2017. Full-year fiscal 2017 net income was 8.5 million dollars or 0.34 dollar per diluted share compared to 47.2 million dollars or 1.72 dollars per diluted share for 2016. For the year, net income decreased 82 percent and earnings per diluted share decreased 81 percent from the prior year.

"While Cato remains profitable, the retail environment continues to be challenging, particularly in women's apparel. This was compounded by the longer than anticipated time it has taken to adjust our merchandising strategy. Both merchandise margins and profitability were under pressure during the year as we worked through these issues by refining our merchandise mix and liquidating underperforming inventory. To help offset the sales decline, we initiated cost reduction initiatives to better align our cost structure. These actions should also benefit us in the coming year," said John Cato, Chairman, President and Chief Executive Officer in a media release.

Review of Cato Fashions’ Q4 and full year results

Sales for fiscal fourth quarter were 211.1 million dollars, a decrease of 3 percent, while same-store sales decreased 8 percent from last year. For the year, the company's sales decreased 11 percent to 842 million dollars from 2016 sales of 947.4 million dollars. Same-store sales for the year decreased 12 percent compared to last year.

Fourth-quarter gross margin increased to 32.9 percent of sales from 28.8 percent of sales in 2016 due primarily to significantly improved merchandise margins. For 2017, gross margin decreased to 34.3 percent of sales from 36.5 percent of sales in 2016 due to reduced merchandise margins and deleveraging of occupancy costs.

"Cato continues to maintain a strong balance sheet, with approximately 200 million dollars in cash and short-term investments and no debt. During 2017, the company returned 72.6 million dollars to shareholders through dividends of 33.7 million dollars and share repurchases of 38.9 million dollars. The company maintained its quarterly dividend of 0.33 dollar per share, or 1.32 dollars over the year,” added Cato.

For the fiscal year ended February 3, 2018, the company opened six stores, relocated two stores and closed 26 stores. As of February 3, 2018, the Company operated 1,351 stores in 33 states.

The company plans no new stores during the year but anticipates closing up to 34 stores by year-end.

Picture:Facebook/Cato Fashions